MILK PRICES LIKELY TO STAY COOL AS "HURRICANE BESSIE" PASSES THROUGH

Editor: Marlene Fritz (208/364-4010 in Boise)
Source: Wilson Gray (208/736-3622 in Twin Falls)

TWIN FALLS, Idaho–The lowest manufacturing milk prices in 21 years are spoiling the party for Idaho dairy producers, cascading from $16.26 a hundredweight in September to $9.79 two month later.

"It’s Hurricane Bessie," says C. Wilson Gray, University of Idaho extension agricultural economist in Twin Falls. "‘Got Milk’ has become ‘Got-a-Lot-of-Milk’ lately. There’s just too much of a good thing."

Reporting in the University of Idaho’s January 2000 Idaho Agricultural Outlook, Gray projects manufacturing milk prices to float in the $10.30-to-$11.00 range for the January-to-March period and potentially in the $10.50-to-$11.75 range for April-to-June.

Through November 1999, U.S. milk production was up 3.4 percent over the previous year, driven by increased output per cow and 58,000 more cows in 20 reporting dairy states. "A lot of that wound up in cheese vats," says Gray–enough to push January-through-October American cheese production up 8.6 percent. Total cheese production for the same period is up 5.9 percent, cheddar up 8.5 percent, mozzarella up 6.8 percent, Italian cheeses up 4.3 percent and butter up 8.5 percent.

Cheese prices, which peaked in late August at $1.9725 per pound for 40-pound blocks, skidded to the $1.10 support price by Nov. 10 and have rested near the bottom since. "Demand for cheese has been good–just not good enough to offset the rising tide of milk," Gray says.

He anticipates that cheese and butter prices will "likely vibrate around their present levels" between now and spring. "The spring milk flush could weaken prices again, unless enough product is marketed or unless production declines enough to offset those effects."

Gray expects discouraging prices to push the industry back to its long-term trend of decreasing--rather than increasing--cow numbers. Nationwide, the dairy herd typically decreases 1 percent in size each year.

In Idaho, however, Gray says continued growth will likely be "the game" for at least 12 to 18 months. Idaho dairy cow numbers are expected to ring out the old year 10 percent higher than they rang in the new one last January.

"Although milk prices will be lower, a lot of concrete has been committed, cash flow is needed and more processing capacity is visible on the horizon," he says.

The University of Idaho’s January 2000 Idaho Agricultural Outlook is available at length, with supporting tables and graphs, on the web site of the UI Department of Agricultural Economics and Rural Sociology, http://www.uidaho.edu/ag/agecon. Once on the home page, Internet users should click first on Publications, then on the Idaho Agricultural Outlook for January 2000. Planning price projections for Idaho commodities can also be found on the home page.